Draft Reports

[Terrel L. Shields]

First, try and think outside the residential form report box.

Does USPAP allow for a draft or preliminary appraisal? It seems I often have to butt deadlines that are short and while I often can produce the number - there may be a contingency or the report itself may take an extra day or two to be delivered.

In an industrial, for instance, a business appraisal of the machinery may be part of the valuation, or the client may be uncertain whether it needs included or not (say, in an estate appraisal of the owner). Providing a summary of the values of the various estates, or parcels, etc. might simply be a summary sheet or provided orally. As such it is an oral report, but probably in a week or two the report is finalized.. Or the CPA / advisor may get back to you and say, we only want the building value and a separate machinery value will be utilized.

Likewise, a two-fold interest may be present. The owner may need to get grannies estate placed in an LLC for the minerals which suddenly become worth a bunch of money, while needing an overall fee simple value for planning or IRS reasons. The mineral value is needed now to complete some forms, but the whole estate can be figured later and your report will be finalized then.

Legit or not under USPAP?

 

[Mr Rex]

Apparently there is some ambiguity in USPAP, so the NCAB come out and said its prohibited in NC:

There is no such thing
as a draft appraisal
Recently Board staff has been seeing a number of what are termed “draft
appraisals” being sent to clients. The appraisers signing the reports believe
that they have no liability for mistakes in the reports since they were not
intended to be the final document.
State law defines an appraisal as “an analysis, opinion, or conclusion as
to the value of identified real estate or specified interests therein performed
for compensation or other valuable consideration.” An appraisal report is
defined as any communication, written or oral, of an appraisal.
Once an appraiser places a value on a piece of identified real estate and
puts any sort of identification of who estimated the value on that report, it is
an appraisal. Some appraisers believe that if they do not sign the report, it is
not an appraisal and they cannot be held accountable for it. This is untrue.
Even an unsigned letter of transmittal may be enough to identify who performed
the appraisal. In fact, Appraisal Board rules require that an appraiser
sign an appraisal report, so transmitting an unsigned report is a violation of
those rules.
Once you transmit a value finding to your client, you have performed an
appraisal. If the client finds an error in the report or believes you have somehow
not met the conditions of the appraisal assignment, the client can ask
that you correct your mistakes or do additional work. By allowing your client
to “review” a draft appraisal, you are perilously close to violating the Ethics
Rule of USPAP.​

In short, there is no such thing as a draft appraisal report.

 

[Stone]

Apparently there is some ambiguity in USPAP, so the NCAB come out and said its prohibited in NC:

There is no such thing
as a draft appraisal
Recently Board staff has been seeing a number of what are termed “draft
appraisals” being sent to clients. The appraisers signing the reports believe
that they have no liability for mistakes in the reports since they were not
intended to be the final document.
State law defines an appraisal as “an analysis, opinion, or conclusion as
to the value of identified real estate or specified interests therein performed
for compensation or other valuable consideration.” An appraisal report is
defined as any communication, written or oral, of an appraisal.
Once an appraiser places a value on a piece of identified real estate and
puts any sort of identification of who estimated the value on that report, it is
an appraisal. Some appraisers believe that if they do not sign the report, it is
not an appraisal and they cannot be held accountable for it. This is untrue.
Even an unsigned letter of transmittal may be enough to identify who performed
the appraisal. In fact, Appraisal Board rules require that an appraiser
sign an appraisal report, so transmitting an unsigned report is a violation of
those rules.
Once you transmit a value finding to your client, you have performed an
appraisal. If the client finds an error in the report or believes you have somehow
not met the conditions of the appraisal assignment, the client can ask
that you correct your mistakes or do additional work. By allowing your client
to “review” a draft appraisal, you are perilously close to violating the Ethics
Rule of USPAP.​

In short, there is no such thing as a draft appraisal report.

Without looking it up, I believe that WI has the same answer as NC on this.

 

[Carnivore]

Draft, Pre-Appraisal, Comp check it is all the same thing

An Appraisal

Zaioistas are going to hate North Carolina and apprarently Wisconsin.

 

[Anthem]

Terrel you bring up some valid reasons for Draft reports and I could think of some more valid reasons ... trouble is opening the door for Draft reports opens the door for too many problems.

 

[PL1957]

IMO, a report is not completed until the appraiser has signed off on it. I don't see anything in USPAP that would prevent an appraiser choosing to provide an interim product to his client before the formal completion of the report. If the appraiser chooses to label this interim product "draft", it doesn't change anything.

 

[Caligirl]

IMO, a report is not completed until the appraiser has signed off on it. I don't see anything in USPAP that would prevent an appraiser choosing to provide an interim product to his client before the formal completion of the report. If the appraiser chooses to label this interim product "draft", it doesn't change anything.

As noted above-check with your state board. The 'tricky' area of USPAP regarding this issue is SR 2-3 ('Each written real property appraisal report must contain a signed certification'). Anyone can have whatever opinion they like, but the bottom line is how their state board interprets this.

 

[The Warrior Monk]

IMO, a report is not completed until the appraiser has signed off on it. I don't see anything in USPAP that would prevent an appraiser choosing to provide an interim product to his client before the formal completion of the report. If the appraiser chooses to label this interim product "draft", it doesn't change anything.

PL has it right...I remember this topic being covered in one of the course I took.

When a value is reported, it is an appraisal...period. A "interim value," as the OP called it, can be developed and reported, but it still has to meet Standards 1 and 2. Both SR 1 and 2 are likely to be different from the main assignment, and those differences, especially on the development side, have to be noted to the client, so as to not mislead. SR 2 is likely different also, since this appraisal is likely to be communicated orally or in a restricted use format.

 

[Caligirl]

PL has it right...I remember this topic being covered in one of the course I took.

PL does not have it right in NC or apparently WI. I've seen the NC decision and there, an unsigned report is considered a violation of USPAP.

 

[Stone]

PL does not have it right in NC or apparently WI. I've seen the NC decision and there, an unsigned report is considered a violation of USPAP.

I have been trying to find where I read that and cannot. It might have been in a class, but I don't know which one to go back and look at notes. It might have been a USPAP class, but I don't necessarily think so.

Take it for what it is worth. I cannot be sure enough without finding the source to say it is definitely so here. I may be mis-remembering as Roger Clemens would say.

So, NC is definitely more solid. Personally, I am going to operate as though it is so here because I believe that to be the case.